How does the use of a robotic shopping assistant impact the breakeven point and operating leverage at Lowe’s? Original blog posting (November 12, 2014)

Lowe’s is using a robot in a store Robotic shopping assistant called OSHbot One store in San Jose, California Will greet customers and assist them in finding products Large screen on front and on back for displaying help and for displaying ads

Same navigation technology as used in Google’s driverless cars Robots are expensive right now Navigation system alone is speculated to have cost $50,000 Assume that a “typical” customer service associate at Lowe’s is paid hourly and works between 10 – 30 hours per week

Question 1 What type of cost (fixed, variable, or mixed) is represented by the wages and benefits paid to a customer service associate at Lowe’s? Justify your answer.

Question 2 What type of cost (fixed, variable, or mixed) is cost of the OSHbot at Lowe’s? Explain.

Question 3 Assume that each OSHbot can replace four customer service associates at the store. How does the change in cost structure at the store impact the store’s breakeven point? Explain.

Question 4 Again assume that each OSHbot can replace four customer service associates at the store. How will OSHbot impact the store’s operating leverage factor? Explain.

Question Recap What type of cost (fixed, variable, or mixed) is represented by the wages and benefits paid to a customer service associate at Lowe’s? Justify your answer. What type of cost (fixed, variable, or mixed) is cost of the OSHbot at Lowe’s? Explain. Assume that each OSHbot can replace four customer service associates at the store. How does the change in cost structure at the store impact the store’s breakeven point? Explain. Again assume that each OSHbot can replace four customer service associates at the store. How will OSHbot impact the store’s operating leverage factor? Explain.

For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at http://accountingintheheadlines.com/ Related video resources can be found at http://www.youtube.com/user/accountingheadlines Questions or comments? Contact Dr. Wendy Tietz at wtietz@kent.edu